Last week, the Wall Street Journal highlighted a small but growing career trend among MBA graduates: seeking investors who will fund their search, acquisition and management of an existing small business.
A Wharton Magazine article described this niche career path, “The model, at its core, involves working with a group of investors to locate, acquire, manage, and grow a privately held business. The “searcher” starts by raising funds from a group of investors and then spends two to three years looking for one special business to acquire and grow. After finding the right business, the searcher is expected to take on a management role at the company and relocate to the business’s headquarters. One of the key differences between the search fund model and traditional venture capital and private equity fund models is that the search fund model is focused on the business owner and is designed to provide a unique transition plan to take the business to the next level.”
Although search funds are not new to MBA graduates, according to the WSJ, they have grown during the pandemic as investors with access to capital are seeking more investment opportunities. In 2019, Stanford’s Graduate School of Business counted 51 new search funds. In 2020, preliminary numbers showed 70 funds. And estimates suggest that more were launched in 2021.
Initially most searchers came from Harvard or Stanford, though today, a growing number of MBA programs are developing search related offerings and bringing in experienced professors from the industry. “Search is really taking off. It doesn’t get better than the search fund model. The average person who does this is 32 years old, a very young CEO,” said Jan Simon, an MBA professor teaching a search fund course at UC Berkeley Haas, In addition to Haas, courses on search funds are now available at IESE, Duke, Dartmouth, and Columbia to prepare students to raise money from investors, as well as to understand the many complexities of the location and acquisitions process. Additionally, MIT, Northwestern, and other universities regularly host clubs and networking events for search, which have garnered the interest and participation of hundreds of students.
While searchers can accelerate their careers and avoid some of the startup pitfalls by acquiring an established business, this career path necessitates a high-risk tolerance. They forego the support of an MBA program’s career center, as well as the stability of a position within a larger company. And the WSJ notes that about a third of searches end without an acquisition. Prospective MBA students wishing to pursue search should ensure that they select a program that has a support infrastructure with professors, coursework, and a network to best set them up for success.
Access the Stanford Graduate School of Business Search Fund Primer to learn more.